Ward v. Estaleiro Itajai S/a

• Decision Date: 31 March 2008
• Docket Number: Case No. 05-61821-CIV.
• Citation: 541 F.Supp.2d 1344
• Parties: Jackie WARD, Plaintiff, v. ESTALEIRO ITAJAI S/A, A Metalnave Company, et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

Page 1344

541 F.Supp.2d 1344

Jackie WARD, Plaintiff, v. ESTALEIRO ITAJAI S/A, A Metalnave Company, et al., Defendants.

Case No. 05-61821-CIV.

United States District Court, S.D. Florida.

March 31, 2008.

Andrew W. Mychalowych, Meghan Cassidy, Haliw Siciliano & Mychalowych, Timothy R. Van Dusen, Lindsay James, Siciliano Mychalowych Van Dusen & Feul PLC, Farmington Hills, MI, Marc Jonathan Gottlieb, Akerman Senterfitt & Eidson, Fort Lauderdale, FL, for Plaintiff.

Thomas Meeks, Carlton Fields, Matthew Thomas Davidson, Zuckerman Spaeder LLP, Miami, FL, for Defendants.

ORDER

WILLIAM J. ZLOCH, District Judge.

THIS MATTER is before the Court upon Defendants' Motion To Reconsider Or Stay The Effect Of The Court's Order Allowing Financial Worth Discovery (DE 190). The Court has carefully reviewed said Motion and the entire court file and is otherwise fully advised in the premises.

I.

Plaintiff entered into negotiations with Defendants for the construction of a new luxury motor yacht to replace her present one. The vessel was to be crafted to Plaintiffs precise specifications, and the terms of the construction, sale, and purchase of the yacht were governed by the Vessel Construction Agreement. DE 78, Ex. B (hereinafter "Agreement"). After the time set for construction to begin, but before the completion date set by the Agreement, the Parties' relationship broke down and Plaintiff terminated the contract. Plaintiff alleges that she did so in exercise of her rights under the Agreement, because Defendant Estaleiro failed to meet certain construction benchmarks and was therefore in default. Thereafter, Plaintiff initiated this action, asserting claims for breach of contract and fraud in the inducement against Estaleiro and two of its individual employees, Francisco Wlasek and Paulo Rolim. The basis of Plaintiffs fraud claim is her allegation that Defendants never had the means, and thus, the intention, to construct her vessel, but negotiated with her nonetheless. With her fraud claim, Plaintiff has included a prayer for punitive damages. It is this relief that gives rise to the instant Motion.

In an effort to discover financial worth information related to her prayer for punitive damages, Plaintiff propounded Interrogatories and Requests To Produce to Defendants Wlasek and Rolim. Defendants moved for a protective order, arguing that Florida Statutes § 768.72(1) requires that before Plaintiff may engage in financial worth discovery, she must receive leave of court by showing a reasonable basis for recovery on her punitive damages claim. See DE 152. In its prior Order denying Defendants a protective order, the Court ruled that § 768.72(1) is a procedural modification to Federal Rule of Civil Procedure 8 and therefore inapplicable in a diversity action. See DE 186. Defendants now move for the Court to revisit its decision. In support thereof, Defendants cite to several non-binding cases from this District that have found § 768.72(1) contains a substantive element relevant to discovery and applied it in diversity actions.

The Court has carefully reviewed Defendants' thoroughly briefed Motion and the cases cited therein. While mindful of the cases in this District that have found § 768.72 applicable to diversity proceedings, the Court finds their reasoning unpersuasive. Rather, consistent with its prior Order (DE 186), the Court finds that § 768.72 is clearly a procedural alteration to Rule 8. The statute's full force and effect is contemplated at the pleading stage, and a second substantive step at discovery is unsupported by the statute's text. However, if the Court were to find that an inexplicable second step lay beneath the plain meaning of the text of § 768.72, the Court would be bound to analyze whether that statute and its requisite showing conflicted with Rule 26. For the reasons expressed more fully below, the Court finds that § 768.72 would directly conflict with Rule 26 and the procedures governing discovery in federal courts. Therefore, because Rule 26 violates neither the Rules Enabling Act nor the Constitution, the Court is bound to apply it and disregard § 768.72. Further, the Court finds that the application of Rule 26 would not result in an inequitable administration of the laws or encourage forum shopping by parties seeking punitive damages in Florida courts.

II.

It is well established that when a federal district court exercises its diversity jurisdiction, the court is bound to apply state substantive law and federal procedural law. Walker v. Armco Steel Corp., 446 U.S. 740, 745, 100 S.Ct. 1978, 64 L.Ed.2d 659 (1980); Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); see Rules of Decision Act, 28 U.S.C. § 1652 (2006). The longstanding problem that has bewildered civil procedure students and federal judges alike is how to determine whether a particular law is substantive or procedural. The question has served as fodder for much academic literature and vexed the federal courts for over a century. Walker, 446 U.S. at 744, 100 S.Ct. 1978 ("The question of whether state or federal law should apply ... has troubled this Court for many years.").¹

The seminal case in addressing this question is Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965). Under Hanna, when both a state law and Federal Rule are potentially applicable, a district court must determine whether the state provision conflicts with the Federal Rule. Vacation Break U.S.A., Inc. v. Marketing Response Group & Laser Co., Inc., 189 F.R.D. 474, 478 (M.D.Fla.1999) (citing Hanna, 380 U.S. at 471, 85 S.Ct. 1136). If there is a conflict, the court must apply the Federal Rule unless it is beyond the scope of the Rules Enabling Act or is unconstitutional. Id. (citing Hanna, 380 U.S. at 471, 85 S.Ct. 1136). As Hanna explained:

When a situation is covered by one of the Federal Rules ... the court has been instructed to apply the Federal Rule, and can refuse to do so only if the Advisory Committee, [the Supreme] Court, and Congress erred in their prima facie judgment that the Rule in question transgresses neither the terms of the Enabling Act nor constitutional restrictions.

Hanna, 380 U.S. at 471, 85 S.Ct. 1136 (citations omitted). Over time, Hanna's formulation of the situation being "covered by one of the Federal Rules" has been morphed into an inquiry of whether there is a "conflict" between the state and federal rule. See e.g., Walker, 446 U.S. at 749, 100 S.Ct. 1978; Cohen v. Office Depot, Inc., 184 F.3d 1292, 1296-97 (11th Cir. 1999), vacated in part on other grounds, Cohen v. Office Depot, Inc., 204 F.3d 1069 (11th Cir.2000). While precision in language is paramount to the craft of a jurist, the revised wording does little to alter the test. When the Federal Rule is said to cover the situation, there is a conflict; when it is not so broad as to cover the situation, no conflict will be found.

The holding of Hanna must be read in the context of its facts. There, an Ohio citizen filed a diversity action in Massachusetts federal court over injuries caused by a deceased Massachusetts citizen. Hanna, 380 U.S. at 461, 85 S.Ct. 1136. The named defendant, executor of the tortfeasor's estate and also a Massachusetts citizen, moved for summary judgment on the basis of improper service. The defendant cited a Massachusetts state law requiring in-hand service to the executor of an estate. In response, the plaintiff argued that the state law was inapplicable and that service was made in compliance with Federal Rule of Civil Procedure 4(d)(1), which permitted service by leaving copies of the complaint and summons at the executor's home with a person of suitable age and discretion residing there. Id. at 461-62, 85 S.Ct. 1136. Thus, the question before the Court was whether to apply the Federal Rule or the Massachusetts state law. In disposing of the question presented, the Court focused its analysis on whether the Federal Rule in question was broad enough to cover the situation at hand: whether service of process was properly made. Construing Rule 4 and its service requirements, the Court found that Rule 4 was "designed to control service of process in diversity actions." Id. at 463, 85 S.Ct. 1136. Thus, the Court found a conflict between the Massachusetts service rules and Rule 4(d)(1). Examining the limits of Rule 4 to determine its coverage in that situation, the Court stated that "the clash [with the state law requiring in-hand service] is unavoidable; Rule 4(d)(1) says — implicitly, but with unmistakable clarity — that in-hand service is not required in federal courts." Id. at 470, 85 S.Ct. 1136.

Hanna demands the enforcement of the Federal Rules unless they are not broad enough to cover a situation. In such a relevant state law may be called upon to supply the rule of decision. Thus, put simply, the rule from Hanna is that when a Federal Rule covers a situation (there, service), but is silent on an action required by state law (there, in-hand service), the Federal Rule must control.

III.

Defendants support the instant Motion (DE 190) by citing to several Southern District of Florida cases that found that the so-called discovery aspect of § 768.72(1) did not conflict with Rule 26. In the words of Hanna, those courts held Rule 26 does not cover the situation of financial worth discovery. See, e.g., State of Wis. Inv. Bd. v. Plantation Square Associates, Ltd., 761 F.Supp. 1569 (S.D.Fla. 1991); Al-Site Corp. v. VSI Int'l, Inc., 842 F.Supp. 507 (S.D.Fla.1993); Sanders v. Mayor's Jewelers, Inc., 942 F.Supp. 571 (S.D.Fla.1996). Plantation Square was the first case in the Southern District of Florida to set forth a reasoned analysis of § 768.72 under Hanna and Erie. Its analysis differentiates between the pleading and discovery aspects of § 768.72, and later cases explicitly adopt its reasoning. E.g., Al-Site, 842 F.Supp. at 510 ("The Court agrees with Plantation Square's conclusion and defers to that...